Velo Rating Report: BB — Outlook Stable

TokenInsight has recently published the rating report for Velo, which has received a project rating of BB with a outlook stable.

Velo Rating Report | TokenInsight

Outlook

Conclusion

Velo Rating Report | TokenInsight

Executive Summary

① The project is clearly focused on application scenarios and market needs, and thus has a fairly good probability for future popularization.

② Team members have sound backgrounds. Core members who graduated from top universities have more than ten years of experience in traditional industry such as finance, as well as experience in management.

③ Competitive strategic partners propel the operation of the project. Lightnet, the key partner company of Velo, offers good support to Velo.

④ The project’s token is reasonably distributed. A considerable portion of tokens is used to construct and develop the ecosystem community. Meanwhile, the release mechanism is clear.

Velo Rating Report | TokenInsight
Velo Rating Report | TokenInsight

Challenges:

① There are many competitors in the payment industry, and the industry needs that are focused on by different competitors have been repetitive. Velo needs time to stand out from the variety of competitor projects.

② Although developing fast, Velo’s community operation started in July 2020 and is in a relatively early stage when compared with some mature projects.

③ Velo token is currently not in circulation, and thus its future performance in the secondary market needs time to verify.

Outlook

The key partner company, Lightnet, can provide a reliable support to Velo. However, there are many projects performing value transfer and payment transactions, and the market is relatively competitive. As a project in such an industry, the future development of Velo is closely related to the extent to which it expands its ecosystem network.

Conclusion

Based on the above information, TokenInsight gives Velo a rating of BB, with a stable outlook.

1. Multi-dimension Assessment

Velo Rating Report | TokenInsight
Velo Rating Report | TokenInsight

2. Project Analysis

2.1 Project Introduction

Below is the project structure of Velo. Based on Stellar blockchain, the Velo protocol consists of two parts: Digital Credit Issuance and Digital Reserve System. Digital Reserve System ensures the settlement of Digital Credit in the Velo network, further allowing a series of economic activities including payment, lending, remittance.

Velo Project Structure | TokenInsight
Velo Project Structure | TokenInsight
Velo Project Structure,Source: Velo, TokenInsight

Specifically, Velo Token, issued by Velo is the entrance of joining the Velo network, any users who want to join the Velo network need to deposit a certain amount of Velo token in order to become trusted partners in the network. Trusted Partners obtain the equal value of digital credit by depositing fiat currency, meanwhile, once trusted partners receive fiat money income from business activities, Velo will issue the equal value of digital credit for them.

Managed by the Digital Reserve System, the value of digital credit is anchored to the fiat currency which is deposited in the system, the value of Velo will fluctuate by market needs. Ideally, as the Velo network grows, more and more users will be willing to join in, assisting the continuous increase in the value of Velo token. As a whole, Velo is a clearly designed project with good feasibility that may have considerable growth in the future.

Velo Token Access Channel | TokenInsight
Velo Token Access Channel | TokenInsight
Velo Token Access Channel,Source: Velo, TokenInsight

2.1.1 Technical Structure

As a project based on Stellar blockchain technology, Velo takes the Stellar consensus protocol as its consensus mechanism. All transactions within the Velo network are publicly visible, the transaction issuer uses Ed2559 encryption algorithm as the signature, in order to ensure the transaction is authorized. In spite of this, because Stellar cannot completely support all applications in the smart contract of the Velo protocol, Velo will also use the protocol, Warp, to enable cross-chain operation, linking Stellar to other public chains. This not only enables immediate digital asset transfer but also aids the arrangement and execution of the smart contract which is used to build the digital reserve system.

Digital Reserve System is the core of the Velo structure, which is now composed of three smart contracts: Governance, Digital Reserve System, and Reserve Manager. Of the three components, Governance is mainly used as data storage; the Digital Reserve system smart contract deals with the issuance of digital credit and stabilizing its value; while as for Reserve Manager smart contract, details are not available.

In conclusion, As a pioneer project in the digital asset payment industry, Stellar has a comparably reliable technology foundation and mature ecosystem network, and it is able to provide a strong foundation for Velo to develop. Meanwhile, the Velo project’s technology whitepaper includes detailed information, but the actual effect still needs time to verify.

2.2 Risk Management and Regulation

As for the security of smart contracts, verified by TokenInsight Research, Velo has finished auditing the codes by August 2020. The auditing report of the Velo smart contract is completed by the well-known code-auditing firm, Peckshield, but it only covered the smart contract DRSv2 of Velo’s Digital Reserve System.

The auditing report provided by Peckshield includes evaluation and analysis of the probability of vulnerability exposure, the impact of a single attack, and severity of risks. The problems exposed include one high-risk vulnerability, one middle-risk vulnerability, and 2 low-risk vulnerability, and according to the latest auditing report, these issues have all been fixed. Overall, the project has a good level of safety.

Example of Smart Contract Auditing Report | TokenInsight
Example of Smart Contract Auditing Report | TokenInsight
Example of Smart Contract Auditing Report,Source: Velo, TokenInsight

Velo is active in licensure compliance. It has obtained the regulatory analysis report by the Singapore based law firm, Simmons & Simmons JWS. Meanwhile, the key partner company Lightnet has submitted an application to the Monetary Authority of Singapore to obtain the MPI license which will allow payment company to provide services including fund transfer and cross border asset transfer. As disclosed by Velo, Lightnet is expected to be licensed for MPI in September 2020.

2.3 Operation Analysis

‘ Velo has a clear path for future development, with frequent updates on media platforms recently.

The development of Velo project is divided into four phases, and to be finished in two years. Phase 0 is to initiate the Velo protocol, set up the testate, dashboard, wallet, and mainnet. Phase 1 is to issue digital credit and upgrade the digital reserve system. Phase 2 and 3 is to start service on the decentralized transaction platform and Velo’s external transaction platform. Phase 4 is to set up a reputation system and Velo decentralized settlement network. The roadmap is clearly planned, with a well-defined development direction. According to Velo official disclosure, the project is making progress following its plan.

Velo Development Roadmap | TokenInsight
Velo Development Roadmap | TokenInsight
Velo Development Roadmap,Source: Velo, TokenInsight

2.3.2 Operation Analysis

Velo started its content operation on media platforms on July 2020, and it has become active on the platforms since then. The postings and contents are mostly about project advertisement and blockchain market education including AMA reviews, hotspot discussion, and blockchain introduction. Below are examples of Velo’s posts. Currently, Velo doest not have a systematic report of the project development schedule, for example, weekly and monthly reports, but such disclosure is on schedule.

Velo’s Postings on Social Media Platforms | TokenInsight
Velo’s Postings on Social Media Platforms | TokenInsight
Velo’s Postings on Social Media Platforms,Source: Velo, TokenInsight

3. Industry & Competitors

Increase in Global Payment Market | TokenInsight
Increase in Global Payment Market | TokenInsight
Increase in Global Payment Market,Source: McKinsey&Company, TokenInsight

3.1 Industry Pain Points

① High transaction fee: Centralized institutions usually require a high transaction fee from business and users of cross border remittance. According to the result of TokenInsight Research, the major international clearinghouse Visa as well as MasterCard induces almost 3% swipe fees. Major banks around the globe induce transaction fees ranging from $20 to $70 per transaction for cross border remittance service.

② Low efficiency and low cross border interoperability: The cross border remittance transaction operated by SWIFT take nearly 4 business days. Meanwhile, the payment network is not operable between different countries, leaving the direct remittance transaction not approachable.

③ Security and Privacy: Centralized institutions own all the private data of their users. There have been a lot of scandals regarding institutions selling privacy information of individual customers.

3.2 Comparison of competitors

Introduction of Competitors | TokenInsight
Introduction of Competitors | TokenInsight
Introduction of Competitors,Source: TokenInsight

Because the value of a stablecoin is 1:1 anchored to the fiat money, its value can be well reserved and it is easy to use in reality. There are a great many players in the field of the stablecoin. Some of them are devoted to building a payment system, therefore are competitors of Velo. However, they are essentially different from Velo. Although their stable-value property is similar to the property of digital credit in the Velo network, digital credit in the Velo system is not circulated in the secondary market, but exists as a necessary element in completing the transaction.

The primary projects in the field of cross border remittance include Ripple and Stellar. Velo chose to construct its network based on Stellar, while there is an obvious competition between Ripple and Stellar. However, the market positioning of Ripple and Stellar is slightly different, and the composition of their ecosystem network is also different.

There are other projects in the industry focused on applications such as e-commerce payment and offline collection. These projects are featured on connecting business and building network, which is similar to Velo’s emphasis of ecosystem expansion. Meanwhile, generally, these projects also allow users to join by a token collateral.

4. Token Economy

4.1 Token Application Scenarios

Because the project is focused on the need in the field of cross-border remittance in South-Eastern Asia, devoted to becoming the protocol layer to provide payment network resolution to the trusted partners in the cross-border payment ecosystem, and able to directly support the settlement of Lightnet’s realization of business remittance, VELO token has great potential for growth in future need. Future application scenarios planned by the project will include adoptions in convenience stores, major supermarkets, and retailing sites. Velo aims to become the network node where users send and receive funds.

4.2 Token Distribution

Velo Token Distribution | TokenInsight
Velo Token Distribution | TokenInsight
Velo Token Distribution,Source:Velo,TokenInsight
Increase in Global Payment Market | TokenInsight
Increase in Global Payment Market | TokenInsight
Increase in Global Payment Market,Source: McKinsey&Company, TokenInsight

Velo token is not yet circulated in the market. According to the project developer, Velo is going to start its initial offering in mid-to-late September 2020. It is planned that the offering will be divided into three phases with 75,000,000, 75,000,000, and 50,000,000 tokens respectively, and 200 million in total, which is 0.67% of the total supply. None of the circulated tokens has a lockup period.

As for the release mechanism, the project provides a relatively transparent and detailed plan. Except for tokens for early investors which will finish the release in two years, other tokens used for project development, community ecosystem construction, strategic partner rewarding, and reserve for the founder team will be released in five years gradually, in order to propel the construction of the project steadily. Moreover, the tokens used as a reserve will be locked up forever.

Unlocking Mechanism | TokenInsight
Unlocking Mechanism | TokenInsight
Unlocking Mechanism,Source: Velo, TokenInsight
Unlocking Mechanism | TokenInsight
Unlocking Mechanism | TokenInsight
Unlocking Mechanism,Source: Velo, TokenInsight

5. Team and partners

5.1 Core Members

Team composition | TokenInsight
Team composition | TokenInsight
Team composition,Source: Velo, TokenInsight

5.2 team of consultants

Velo Rating Report | TokenInsight
Velo Rating Report | TokenInsight

5.3 Strategic Investment Institutions and Partners

Selected Investment Institutions and Strategic Partners of Velo & Lightnet | TokenInsight
Selected Investment Institutions and Strategic Partners of Velo & Lightnet | TokenInsight
Selected Investment Institutions and Strategic Partners of Velo & Lightnet,Source: Velo, TokenInsight
Selected Partners of Velo & Lightnet | TokenInsight
Selected Partners of Velo & Lightnet | TokenInsight
Selected Partners of Velo & Lightnet,Source: Velo, TokenInsight

6. Community analysis

Velo Social Media Followers | TokenInsight
Velo Social Media Followers | TokenInsight
Velo Social Media Followers,Source: TokenInsight, September 16, 2020

As for website visiting and searching, there have been fewer than 5,000 visits to the Velo official website, but the number of visits in July has increased from that of June, showing great recent progress in this issue. Moreover, the number of related results from Google search is satisfying, with a good amount of media exposure and the growing flow of network traffic.

Velo Visit Popularity | TokenInsight
Velo Visit Popularity | TokenInsight
Velo Visit Popularity,Source: TokenInsight,Similarweb,Google, September 16, 2020

The distribution of Velo’s visiting address is even. Mainland China takes the greatest proportion, reaching 29.69%. The majority of visits to the Velo website come from China and the U.S., while some are from the Europe. As a whole, the number of website visits is lower than 5,000, but to some extent, the data shows that Velo has a good base for future globalization.

Percentage Of Traffic Send By Top 5 Countries | TokenInsight
Percentage Of Traffic Send By Top 5 Countries | TokenInsight
Percentage Of Traffic Send By Top 5 Countries,Source: SimilarWeb, TokenInsight
Velo Rating Report | TokenInsight
Velo Rating Report | TokenInsight
Velo Rating Report | TokenInsight
Velo Rating Report | TokenInsight

About TokenInsight

Founded in 2017, TokenInsight is a Leading Data & Tech Driven Blockchain Financial Institution. TokenInsight pioneered a complete blockchain industry classification system, covering more than 1,600 projects, releasing more than 300 rating reports, and conducting in-depth studies into 10 major industries.

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